Medicare outlook improves slightly, report shows

WASHINGTON — The financial outlook for Medicare has improved because of a stronger economy and slower growth in health spending, and the financial condition of Social Security has not worsened but is still unsustainable, the Obama administration said Friday.

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"The projections in this year's report for Social Security are essentially unchanged from last year, and those for Medicare have improved modestly," Treasury Secretary Jacob Lew said.

The Medicare trustees — four federal officials and two public representatives — said in their annual report that the "modest improvement" in the outlook for Medicare's finances reflected lower projected spending for skilled nursing homes and private Medicare Advantage plans.

The administration said the outlook for the Medicare trust fund was brighter because of the 2010 health care law. It squeezed nearly $500 billion out of Medicare over 10 years, in part by trimming payments to many health care providers, including nursing homes and private health plans.

But the number of Medicare beneficiaries will grow rapidly, to 73 million in 2025 from 52 million today, so paying for the program remains a huge challenge, administration officials said.

Older Americans stand to benefit from the slower growth in health spending. The standard Medicare premium paid by most beneficiaries will probably stay at $104.90 a month, next year, the trustees said in their report.

Under current law, the administration said, Medicare's hospital insurance trust fund will be exhausted in 2026, and the Social Security Trust Fund will be depleted in 2033. The administration said in its 2012 report that the Medicare trust fund would run out of money in 2024, and the Social Security fund in 2033. The trustees urged Congress to shore up the finances of both programs.

Health and Human Services Secretary Kathleen Sebelius said that Medicare spending per beneficiary had risen just 1.7 percent a year from 2010 to 2012. In the prior two decades, it rose more than 6 percent a year, on average.